According to analysis from the Parliamentary Budget Office (PBO), the federal budget could face a $58 billion revenue decline if average productivity growth remains at 0.5% over the next four years. This forecast is deemed credible by economists amid criticism of Treasurer Jim Chalmers’ higher estimate of 1.2%.
Australia’s productivity growth has averaged only 0.1% over the past eight years, with some economists suggesting long-term growth may only be around 0.4%.
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HSBC Australia chief economist Paul Bloxham said Treasury’s 1.2% productivity growth assumption was “unrealistically high” and the RBA was being optimistic in assuming productivity growth would hit 0.7% by December 2027.
